By Adam Wernick
The Trump administration (click here) may believe that climate change is a hoax invented by the Chinese, but Moody’s Investor Services is taking it quite seriously.
Moody’s, one of the main agencies that rate the ability of states and communities to pay back money borrowed in the form of bonds, is beginning to consider how well those jurisdictions are prepared for climate extremes and instability. It recently unveiled standards they plan to use to integrate climate risks into their ratings for bond issues.
Fixed-income expert Andrew Teras of Breckenridge Capital Advisors in Boston says this is just the beginning of a movement within credit rating agencies and financial advisors. “In many places across the country, a credit rating is an important thing,” Teras explains. "It allows cities to access the capital markets or borrow for infrastructure projects at a reasonable interest rate. The rating agencies are telling us that we are starting to move to a point where they may take action — that is, lower your credit rating — if you are not attuned to these risks. So, this could be pretty significant going forward.”...
